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Black Gold: The Future of Canada as a Petro-Economy
By By: Purti Awal, iBBA, Contributor
Saturday, February 18 2006
Economic progress and raw power have engulfed Canada in the last few years as the nation readies itself to reshape its future.
The nation has plenty of what the rest of the world cannot live without—oil.
This black gold which has been locked away in the ground for millions of years is the commodity that holds power and trillions of dollars in trade possibilities and is the future of Canada’s footing in international politics and trade. Canada has found its own Texas—the Alberta Tar Sands.
The Alberta Energy and Utilities Board estimates that about 1.6 trillion barrels of crude oil rest underneath the tar sands, of which 11% – or 175 billion barrels – are recoverable, placing Canada’s oil reserves as the second largest in the world, next to those of Saudi Arabia.
Although the vast potential of Canada’s oil industry has been evident since 2003, the Alberta Tar Sands were a geologic curiosity until relatively recently.
In the face of increased international oil prices, it has now become economically and technologically viable to extract this oil. This elevated position in international oil markets will have significant economic and foreign policy benefits for Canada.
Higher oil prices are particularly favourable for prospects of developing Alberta’s oil sands deposits.
Estimates from Canada’s National Energy Board suggest that by 2015, crude oil exports will have almost doubled to $2.8 billion. Aside from the booming trade industry, this will also attract significant new investments to Canada. Various firms have committed to an astounding $100 billion of capital expenditures in the area.
The Canadian dollar is now considered a petro-currency, and by rising in-step with the commodity, reached a 14-year high of 87.88 U.S. cents at the end of January.
It certainly helps that we are situated next to the world’s most ferocious consumer of oil, the United States; even President Bush admitted in his recent State of the Union address that his country was “addicted to oil.” It also seems that Canada has caught the attention of China which has expressed keen interest in the tar sands to fuel its rapidly expanding economy.
However, such rich inheritances seem to be mixed blessings. A strong dollar makes Canadian exports more expensive and thus, less attractive. Considering that our economy relies heavily on exports, the picture is not all that rosy, especially for Canadian manufacturers.
Moreover, the U.S. has found China’s interest in the Canada’s tar sands somewhat unsettling. As Canada is the largest supplier of crude oil to the United States, U.S. officials are now concerned about losing access to a reliable source of crude oil to a rising superpower.
Beyond international political considerations, oil related tensions are also palpable within Canadian borders. Alberta, reaping an economic jackpot, now stands as the lone province with no debt and is projected to have a budget surplus of over $8 billion for the fiscal year.
Amid Canada’s tangle of regional rivalries, this definitely means a fundamental shift in balance of wealth and power westward. It is becoming increasingly difficult for provinces to compete against Alberta as the nation plunges into regional fiscal imbalances which our system of equalization was meant to prevent.
The rising Canadian dollar is hurting the bottom line of the manufacturing base in Ontario, especially the auto industry—the engine of Southern Ontario.
In the years to come, Canada will need Alberta far more than Alberta will need the rest of Canada. Whether reaping this rich bonanza of oil sands will secure the nation’s economy and prosperity or butcher the country into economic segments, is what remains to be seen.
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Re: Black Gold
Written by Guest on 2006-02-18 12:31:54
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